Is a Retirement Investment Calculator of any use?

A retirement investment calculator could be very misleading when used in
isolation. However, when you have educated yourself about retirement
investment planning, such a calculator could be used for rough
estimates.

However,
before you play with any retirement calculator, educate yourself to
overcome any uncertainty in taking control of your retirement planning.

When you consider such a calculator, Keep the following in mind:

When
planning during your pre-retirement years, your regular deposits
benefit from cost averaging and you effectively get a higher return.
During retirement, regular withdrawals reverse the benefit from cost
averaging and effectively produce lower returns. Generally, retirees
will get 1% pa lower return than in the pre-retirement phase.

The
published returns on mutual funds and variable annuities are gross
returns. You must subtract transaction or mutual fund costs. The average
investor loses at least 1% pa of the return due to these costs.

Retirees
use a much more conservative spread for their investments than people
still in the work force. Your retirement calculator should allow for
this too.

Most retirement plans are tax deferred. That means
that you don't get taxed on the amount of income received that is
diverted to your retirement plan. Your savings also grow at a before-tax
rate. Consequently you actually get a higher return on the amount
invested. After retirement you get taxed on your withdrawals and the net
return on that investment is thus much lower than in pre-retirement
years.

I posed the question about the usefulness of
an investment calculator under this section that is looking at
retirement investment planning because it is important to use such a
calculator with caution when you do your planning.